Adopt an ‘Invest to Test’ philosophy to quickly abandon, pivot, or continue…
To extend and deepen our discussion on digital disruption (see our last post around the concept of Future Surfing), let’s take a look at how you can leverage digital technologies and mind-sets to produce start up business opportunities within highly complex environments.
We’re living in a so-called “VUCA world”: characterised by Volatility, Uncertainty, Complexity and Ambiguity. Across virtually all industries, we’re seeing product lifecycles shortening, technology change accelerating, and customers demanding ever-greater value from businesses.
In studying decision-making in VUCA environments, British organisational theorist Professor Ralph Stacey notes that with longer product cycles and little technological change, it’s possible to be rational and measured using their investments. We’ve enough time to build comprehensive business cases, and run proof-of-concept and proof-of-value programmes, as we develop standardised services in fairly static markets. We can “prove” the work before we start.
In VUCA environments, where product cycles are short and technological change is fast, taking a traditional method of decision-making actually gets to be a liability – potentially costing time, money and lost opportunity. Variables replace constants as our decision-making factors.
Within this complex environment, decision-makers require to use Invest to Test.
Invest to Test can be a dynamic approach… Begin with some well-founded assumptions, but don’t forget that however confident you may be, they are still only assumptions. Invest the smallest viable amount of resources (financial, human capital, intellectual etc) in building real-world prototypes and services that will reliably test these assumptions. Here you’re looking to make variables “constant” (a minimum of for a while).
Let’s assume, for example, that your customers would love you to quote competitor prices when presenting quotes to them. Don’t immediately dismiss this as irrational or despite best-practice. Test the idea: build a prototype experience and present it to 50 of one’s most loyal customers. Request their feedback… Could it be as useful as they believed it might be? Can it increase trust and loyalty within the brand? Does it enhance the customer experience? Do they really be also ready to purchase this kind of service?
It’s necessary to ask the proper questions, to stress-test your assumptions and judge whether they’re valid.
From here, you can find three options: to abandon the item or feature, to pivot it (re-cast it as something slightly different and test again), in order to continue with further incremental investments and cycles of user feedback.
The short response is ‘not necessarily’. In precisely what your business does, we must draw a sharp distinction between two approaches:
Future-Proofing… fast-following your competition by looking into making sure you’re aware and ready for industry change, positioned to quickly adapt to new demands, although not being the catalyst for change.
agile business transformation -Surfing… once we introduced inside our last blog, this can be about actively taking the battle to your competitors and inventing entirely new methods to solve customer pain points.
Interestingly, in McKinsey’s ‘The case for digital reinvention’ report, the analyst firm showed that fast-followers (future-proofers”) saw an average 5.3% revenue uplift as compared to the competition. The real disruptors (“future surfers”), however, enjoyed a 12.3% revenue improvement.
Nevertheless the real goal is to merge both strategies in your organisation, using every one where celebrate probably the most sense. For instance, you could apply future-surfing for your core areas of differentiation, and future-proofing for all those more commoditised places that you’re not planning to distinguish yourself. Adopting both strategies, and executing them well, `could generate revenue uplifts up to 18.6%, in accordance with McKinsey.
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